AN ARGUMENT ON BEHALF OF INCENTIVES FOR LOW WAGE JOBS

Economic developers are faced today with growing controversy over issuance of tax and other financial incentives that bring new jobs into their community. Incentives are more “hotly contested” when the wages of the job are viewed as a meager living wage.

In theory, minimum wage “hurdles” to obtain government incentives is good, in that it encourages creation of desired “higher wage” employment in the community.

However, there is growing evidence that minimum wage criteria may in fact have unintended consequences – specifically eliminating jobs traditionally offered to less educated and skilled workers ultimately denying them an opportunity to gain experience and earn job skills for higher wage employment.

The greatest impact of a minimum wage hurdle affects entry-level jobs, typically filled by the young and jobless.

Profiled in the Review & Outlook published in the Wall Street Journal (March 5, 2010), teen unemployment has increased each time the minimum wage has risen. This data provides strong evidence that raising the minimum wage eliminates the propensity for private businesses to create entry-level employment opportunities.

It is a simple economic principle – business employs labor only when labor contributes to business profits. This principal can easily be demonstrated by business use of modern technology to replace certain human skills.

Economic developers represent many geographies some with severe youth unemployment.

A question to ponder is whether it is politically correct to offer an incentive to a business that will create entry level jobs that can be filled by the young and maybe the jobless.

While these jobs may not provide a desired living wage, such jobs offer an opportunity to gain “employment credentials” that can be used to advance within the work force.

The debate of whether it is good government policy to offer incentives for low skill/low pay jobs will continue. However, the notion that higher wages for low skill jobs destroys the number of jobs offering entry-level employment opportunities is real.